THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

What is Help to Buy?

It is run by the government to help you get onto the property ladder even if you do not have a large deposit saved.

In England, the scheme gives you an equity loan from the government that you can put towards buying a new build home worth up to £600,000. The loan is interest free for five years.

To buy a home you need a deposit you have saved yourself of at least 5% of the purchase price. The equity loan from the government can cover up to 20% of the price, and a Help to Buy mortgage covers the rest.

For example, if you bought a home that cost £200,000:

You could pay a 5% deposit of £10,000

You could get a 20% equity loan of £40,000

You would need a mortgage for the remaining 75%, which would be £150,000

How much does it cost?

You do not pay back the exact amount you borrowed because your equity loan is calculated as a percentage of your property's value.

For example, if you bought a property for £200,000, a 20% equity loan would come to £40,000. If you sold your home later for £220,000, you would have to pay back 20% of this to the government, which would come to £44,000.

For the first five years this loan is interest free, but you pay a monthly management fee of £1 by direct debit.

After five years you will be charged an additional annual fee until you have paid back the loan.

This will start at 1.75% of the amount you owe and is charged each year.

The rate will increase each year by the same amount as the Retail Price Index (RPI) plus 1%. The RPI is a statistic the government uses to measure inflation.

Help to buy scheme FAQs

The equity loan scheme can be used in London, and the loan can cover 40% of the purchase price instead of 20%.

Q

Can I buy a property off-plan?

A

You can reserve a home before it is built and use the Help to Buy scheme. Make sure your mortgage offer is still valid when the sale goes through.

Q

Could I get shared ownership instead?

A

Yes, the government also offer the Shared ownership scheme, which lets you buy a share of your home's value of between 25% and 75%.

Q

What is the Help to Buy ISA?

A

It is a savings account that pays tax free interest and includes a bonus paid by the government if you use it towards a deposit. Find out more.

The Help to Buy mortgage guarantee scheme

The mortgage guarantee scheme ended on 31 December, 2016.

This scheme let you buy a home with a deposit of at least 5% of the property's value and a mortgage to cover the rest. The mortgage covered up to 95% of the total price, which is called its loan to value (LTV).

The government provided a guarantee to your lender for up to 15% of your home's value. This would cover some of the lender's costs if you failed to pay your mortgage and they had to repossess your home.

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